Readers' comments

sirfleetwoodbrougham - on Scotland using the pound with UK's permission..

Scotland would have no control over interest rates.

Which would not matter too much as long as the Scottish economy followed the English economy - as interest rates that suited England would de-facto suit Scotland.

However - if the economies diverged - then it could be a problem.

Hypothetical scenario:
OIl would make up a larger proportion of the economy in Scotland. Lets say very high oil prices resulted in more money in the oil sector, which meant that Scotland started experiencing high inflation.

However, at the same time, the high price of oil is slowing the English economy, as oil is a major import.

However, the Bank of England would only have to set rates for the RUK - so would choose low interest rates, which could worsen inflation in Scotland - if Scotland were using the pound outside of a currency union.

Within a currency union (or as we are now) the BoE has to consider the impact of changing interest rates on the entire economy (England and Scotland) - and as we are one merged economy, without any barriers to trade, inflation tends to equalise over the whole economic area.

All this talk of trillions is all very well, but the actual impact is that Scottish GDP goes up (and RUK GDP goes down) - but no-one in Scotland actually becomes materially richer.

The impact we would see is the taxation of the profits of oil companies - which is a much smaller number (and volatile). The overall impact makes us each about £500 per year less in debt, assuming oil prices stay high.

Doesn't seem to work that way with Norway. . . . its quite likely if Scotland had its oil revenues from 1990 it would be in the same situation as Norway - the richest country in Europe, the best health care and education in Europe and £400 Billion or so in the bank.

You have to explain to us what the major significant difference between Norway and Scotland is other than independence.

The UK sold the rights to the UK's oil fields to private companies - and chooses to tax the profits. Norway set up a state owned oil company (Statoil) so receives the profits. That is the main difference between Scotland and Norway - for us to become like Norway we would have to renationalise the oil industry.

I think it is equally likely that, had Scotland had oil revenues from the 1990s, then we would have reacted as the Netherlands did when they discovered gas in the 1970s (as culturally and economically we are far closer to the Netherlands than to Scandinavia). The Netherlands suffered from hypoerinflation and economic collapse. The point I am making is not that this would DEFINITELY have happened, but simply that it is ludicrous to assume that Scotland 'would have' been just like Norway. We have an entirely different political culture.

The main reason that 'Norway' is continually touted as the country that Scotland would be like is because Norway is the only 'arc of prosperity' country that did not collapse.

Based on the SNP's recent taxation proposals (3% below UK) and general opinions they promote, it is clear that the country Scotland would most be like is Ireland.

And Ireland has a perfectly reasonable economy - aside from a banking sector that became too large and collapsed, costing a lot of money to fix. So long as an independent Scotland avoided becoming too dependent on any one section of its economy, then it could avoid that.

I do not believe there is any evidence whatsoever that suggests Scotland is closer (politically and culturally) to Scandinavia than England. That seems to be a very recent (i.e last 5 years) idea - and not one that really holds up to scrutiny.

Ethnically Scots are a mixture of Anglians, Britons, PIcts and Gaels. We have only historically had fleeting links with Scandinavia based on trade. Indeed, given that the Normans were Scandinavians who settled in England via France, there is a stronger argument linking England to Scandinavia.

And culturally and politically we have been intertwined with England for the entirety of our history.

And I did not claim that oil reserves would not make a difference. I was simply pointing out that different countries make different decisions about how to handle resource wealth - and that the long run implications can be positive and negative. To blithely assume we would do well because Norway did is to ignore all of the countries that have suffered from the economic problems that arise when an economy becomes to concentrated in one area.

Sorry - I do not mean to be offensive - and I apologise if I have been.

I just do not think there is much credibility to the idea that we are more 'Scandinavian' than 'English'. Scotland and England - and Wales and Ireland - have all had very close cultural and political links (albeit dominated by one of the four) - whereas the same is not true of us and Scandinavia (setting aside the Shetlands of course - but then, that represents a tiny proportion of the Scottish population).

Whereas Scandinavians have always struck me as being a very distinct and different culture. I can see the similarities between Swedes and Danes. I cannot see the similarities between Swedes and my fellow Scots....

Scotland have similar view of society to Scandinavians - even to the extent of 'Jante'.

If you have deal with Scandinavians, especially Finns there is clearly a commonality of cultural outlook that does not exist between the Scots and the Southern English.

I'm not disagreeing with you about the many different ways in which Scots resources could be used. The point is the Scots would HAVE those resources to use as they see fit, rather than donating them to successive Westminster governments they have utterly rejected in the ballot box.

It makes no sense at all to donate Scots resources and wealth to Westminister governments they have consistently rejected.

That's interesting. I wonder how much if it differs depending on where you are in Scotland.

Anyway.

Yes,. on the issue of polity - I do agree. We are different from the South English (but similar to the North IMO). I think my real issue is the idea that we would be like Norway. I think we would be different to the way we currently are - but I think we would probably have also made our own mistakes!

I think I find the current political debate a bit unrealistic. An indy Scotland (with its well educated population) would be fine - as I said - a bit like Ireland - which is recovering and will return to growth soon.

The Finns are very close culturally to the Scots, Helsinki and Scotland have the highest murder rates in Europe (same cause, drunk young men knifing each other) and they both have very similar medical profiles - heart disease, obesity.

Finns have a very similar attitude problem - what do you expect from a country of 8 million that attacked the USSR. When they scrap, they scrap :-)

The Norwegian's and Swedes are terrified of them on a personal level.

So I don't think Scotland is going to be any more like Norway than Finland is - but it will be able to make its own decisions>

As for the North of England - well I recently spend some time there. If Hartlepool and Newton Aycliff is Westminster's vision of what it wants for Scotland. We can cut the ties tomorrow.

As independance unlikey its seems almost an acdemic consideration however for curiosity wonder.

What if scotland use the pound with out uks permission? Scotland no set power over monetry policy currently, so what would be the partiical implications of using the pound like zimbabwe uses the american dollar. As could buy pounds like any other counrty.

it funny i watching some fool britiania on you tube and below is advert link scotland loseing the pound by the union capagine. I cant help but think that scottish indepenace appeal to public not be lost on fear or losing pound as most electrate not most likly consider this the significate issue may be. Also that if was a yes vote then may be not as clear that would as infered

Is the idea a) to simply use a (relatively) strong and established currency on independence - and the pound is preferable to the dollar because we already use it

or is it b) to use a currency that is the same as that of England (so in the hypothetical situation where England abandons the pound, we would too)?

I realise that both of those happen in a currency union, but whether a) or b) is the driving force behind this idea would impact the decision about whether to use the pound without being in a currency union.

It looks increasingly unlikely, buy should Scotland choose independence then I think the most likely path would be to use our own currency.

Although this exposes the currency to a lot more pressure from international markets, it is far more in line with actually being 'independent' if we do so.

The main reason that the SNP proposed retaining the pound was to avoid scaring Scots voters who have not yet decided how to vote in the referendum. Polling data suggests that this strategy is not working - IMO the SNP should abandon it and start coming up with bolder ideas about how Scotland could change if it became independent (rather than emphasising how things will stay the same).

Why do the Conservatives in Britain and Canada want to keep Scotland and Quebec when they would have political domination of their states without them?
Given either or, the political support to run vibrant economies would seam more important then crude nationalism,

Well it seems clear to me that the rational economic thing for Scotland to do is to stay in the Union. However Mr Salmond is intent on maximising the Scottish emotional vote, which he believes will be enough to get enough votes for independence. Things like the timing of the vote and lowering the voting age are part of this strategy. The likelihood of a yes for independence is much greater than the mainstream media tends to present. I do not think this emotive issue will be decided rationally.

I consider myself British and English, though my parents are Scottish and Irish. I live in the South of England with my family. A part of me will be cauterised if Scotland becomes a foreign nation, but sadly I see it as increasing likelihood. I think Mr Salmond is too clever for Mr Cameron and Mr Osborne, remember he has effectively trumped them both already over setting the date for the referendum and he only has to worry about the Scottish voters.

Support for independence has stuck at 30% for years - despite Salmond's best efforts.

And he is increasingly viewed as a liability to his own party.

I think you are overestimating Salmond's intelligence. Cameron let him choose the date because that didn't bother the Conservatives. The only thing the Conservatives wanted to get rid of was the extra 'Devo-Max' question that the SNP had been proposing. They got what they wanted and Salmond did not get everything he wanted.

Well, taxation would be the next big item that could be devolved. Sooner or later Holyrood should get some taxation powers, even if it remains in the Union - because otherwise we have the slightly odd system where Holyrood spends money that is raised by the Treasury (which breaks the traditional idea that governments should raise the money they spend).

Whether Salmond or Cameron is cleverer - I don't really know. At the end of the day, what matters to Salmond is persuading enough people to vote for independence. Scots are not stupid - if Salmond (or Cameron) spends too much time engaged in political chicanery, rather than simply trying to put forward a good case for independence (or the Union) then they will lose.

To a certain extent Salmond needs to be clever as he is fighting against the status-quo. All Cameron really needs to do is make sure that there is sufficient doubt about independence to keep Scots from voting 'Yes'. Salmond really needs to convince people.

I sort of agree - I think we are politically quite different from the English. But it is more complicated than you suggests.

1) We voted for New Labour! Sometimes we get Tory governments we dont support and sometimes we get Labour ones that we do - but then that happens in any democracy anywhere. Moffat always votes Tory in Holyrood elections, yet ends up governed by the SNP. Is this an argument for Moffat declaring independence from Scotland? - on its own, then yes - clearly Moffat should become independent - but in reality - you need to look at the considerable benefits Moffat gets by being part of a larger country.

2) We also have large costs. The GERS report suggests that - independent - we would have slightly lower debts than England and an economy more dependent on oil. We would not become vastly better off - and in reality - England is not stealing huge resources from Scotland.

The real economic benefit from the union is (arguably) stability - with an economically volatile resource such as oil, the impacts of a fall in price are less noticeable if oil is 2% of the UK economy compared to around 20% of the Scottish economy. Of course that was a 'much' better argument before the UK economy became too dependent on finance - which also turned out to be volatile...

The cross border trade represents nearly 70% of Scotland's non-oil "exports", which is four times its exports to the Eurozone. For rUK it is actually less than 7% and about a quarter of exports to the Eurozone, so while a Sterling zone is pretty important for Scotland it is almost irrelevant for rUK. Anyone rubbing their hands with the prospect of a spectacular appreciation of the "Scottish Groat" was not working in Scottish industry during the early 1980s!
The truth is that Alec Salmond is absolutely right; a Sterling zone would be the best option for everyone. However, George Osborne is also right; currency unions without political unions don't work. For this "child of the Union" the answer is pretty obvious - let's just get on with living together for the next 300 years or so.

My goodness, you would think this had never been done before or something.

When Ireland left the Union, it kept the pound for about thirty years, that being the most convenient arrangement for both parties. New Zealand, to pick one of many former British colonies, did much the same following its gaining of Dominion status. Etcetera.

Many English-based businesses trade in Scotland; they don't want to erect a currency barrier unnecessarily. And the balance of payments impact on rUK because of oil purhases from Scotland would be a very significant encouragement for them to reach an amicable arrangement.

Although I think a separate Scottish pound is unlikely to appear in the short to medium term, I would like to ask correspondent PJ in Glasgow why exactly he thinks it would be "less valuable"?

Er, PJ, have you followed the Norwegian Kroner over the last few years?

Aye, but neither Ireland nor NZ were in a currency union with the UK. The UK cannot prevent any country from simply using pounds as its currency - but then, it doesn't matter (to the UK) if they do - it is not constrained in any way.

The SNP want a currency union, which means that the BoE would need to make decisions on interest rates that benefit both economies. That is something that has not happened before - and is very different to the Ireland or NZ cases.

Scottish independence will work smoothly if it is amicable and both parties are reasonable. However, if both parties are reasonable and relations are amicable, then why would independence occur? The act of wanting the divorce usually leads to one or (more usually) both parties to become unreasonable. Ultimately, I can't see Scottish independence ending well for either side except for a few nationalists who would wrap themselves in the flag to protect themselves from the economic pain.

In practice, nobody (on either side) is going to erect any kind of border or trade barrier between Scotland and England. It is not in the interest of either side to do so. When Scotland votes for independence, it will take some time to work things out legally (including with continuation of EU membership) - but the practical situation on the ground is not going to change.

To say anything else would just be puerile scaremongering (no, nobody threw up borders or trade restrictions against the Irish Republic...).

If you want to argue in favor of membership of the UK, you have to argue that the UK government makes better decisions for the Scottish people and economy than an independent government would (e.g. on military spending & activities, on visa policy, on tax design, etc). That's a very hard case to make.

Certainly, the gains from EU membership are massive (customs union, single set of regulatory standards in product markets for a massive economic area, free movement of people & capital, etc). But the gains from UK membership just aren't there.

It has nothing to do with Britain - which would be the successor state and EU member. Scotland would not. You are right, they would muddle something through to get Scotland into the EU fairly quickly, but Spain would likely make sure it it would be messy, bodged and highly unfavourable.

In terms of this: ' the gains from UK membership just aren't there' - one comment in response. Scotland went bankrupt in 2008 when its finance industry lost £65 billion. It was bailed out by England. To claim Scotland derives no benefit from the union is, frankly, insulting.

RBS is very much a multinational. The real headquarter is in London (though it has a secondary headquarter in Edinburgh, all the senior staff are in London). Its operations in England are far larger than those in Scotland; its operations in the US were greater than those in Scotland in the run up to the crash. Similarly so for HBOS. Scotland hasn't really had a banking sector for a couple of decades, since all the financial sector lobbying has to be done in London (though clearly, financial market & professional concentrations in London help too).

Banking is a global problem. Really, no state should be bailing out its banks - they should be well capitalized, they should be kept small, they should have limited mutual exposure and they should be allowed to go bust when they make losses. But that's a separate discussion.

Location of operations, accounts or branches are all irrelevant. RBS is domiciled in Ebinburgh, not London, and under EU passporting regs, all account holders in Europe would have been bailed out by the Scottish government.
This is relevant to the independence discussion because in the event of a bank failure, the only way Scotland would have to raise revenue to cover its obligations (without the BoE's ability to print Sterling) would be to raise it on the market.
Exactly the same happened to Kaupthing and Landesbanki in Iceland; their account holders were mostly in the UK and Netherlands. It was still Iceland on the hook.

The market knows this, so lending to Scottish institutions would carry a risk premium which would be transferred down to business operating cost. This is one of the hidden benefits Salmond is refusing to acknowledge.

The oil will last Scotland another 50 years, with it, Scotland will quickly fall in income.

It is in the interest of England that a barrier is raised, to argue the opposite is to be without reasoned thought.
There is no reason for the UK to play nice, the Scots have been treacherous in the past, they are owed nothing.

The situation legally is black and white, they will have to sign up to all the international treaties from scratch.

No trade restrictions against the Irish Republic? You don't know your history:http://en.wikipedia.org/wiki/Anglo-Irish_Trade_War
Ireland was crippled and had to beg the UK to allow tariff free imports. It is why so many left Ireland, it is way Ireland has never recovered fully.

To think that Scotland will get a deal as good as Eire is to be naive, as Scotland offers the UK very little.

i found your comment quite funny actually, and i think you'll find it was the UK not 'england' that bailed the banks (that are regulated by westminster) out. and for the record if scotland had become independent in the 70s they could of paid that off dozens of times over without batting an eye lid. also staying in the UK is more un certain than leaving, how would we know we'd even be in the EU or not? should we just continue to place our trust in westminster luton boys? to make the right choices for scotland? NO! another thing you seem to be completely ignorant off is that scotland is part of the UK, so at the moment we own a percentage of any UK debts AND assets. of course most of the 'assets' are owned by the queen herself, and non of the debt. but we'd be happy with control over the oil,fishing, all our natural resources and our ingenious people. the union benefits from scotland all together too bloody much

This neatly illustrates the tension that has already been highlighted by The Economist. If Scotland votes for 'independence' they will not get much more independence but they will get a lot more economic hardship.
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It is the same stupidity spouted by UKIP. The UK wont get more independence by breaking from Europe but would suffer economically.

That is true. Scotland has been a net beneficiary of money from the South for a long time now, possibly since the union began except for two points when oil prices were high (today and 30-40 years ago).
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They are over-represented in parliament and so they have a louder voice as well. All parts of the UK benefit from the union and all would suffer from its dissolution although Scotland would suffer disproportionately.

Thank you, it is nice to see smileys and politeness :)
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Ireland and Norway are completely different. Ireland was for a long time more of colony without any kind of fair representation in parliament where as Scotland was *part* of the UK part of a single country.
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It is interesting to note though that Norway's riches have come (and will go) through oil where as Irelands 'riches' have come through a more or less financially parasitic relationship with the EU. Ireland of course are happy to be a continuing beneficiary of EU cash and see no problem with this situation.
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The long term benefits to Scotland are clear. Each generation is economically better off because the UK believes in at least a *partial* redistribution of wealth. You dont see the North of England trying to declare independence from England even though they have been financially dependent on the South for many years now.
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The cashflow is fine. The South wouldnt be in a position to be rish and handing money over to Scotland if it werent for some intangible benefits which allowed it to happen. Urban areas are generally richer than rural ones but no one campaigns to shut down the countryside.

I can only refer to my previous remark. Were your statement to be true, it is hardly an advertisement for the Union. You imply Scotland should be grateful for the crumbs it receives from the rich man's table...and even apparently that it is only because of the Union that Scotland experienced any economic growth at all in the last century. (Eh??)

I suggest Scotland would be better off runnning its own afairs instead of having policies suited to a different economy and polity imposed on it.

Even the Economist has recently and belatedly observed that Scottish economic interests differ from those of the UK as a whole.

The UK is governed to suit the interests of London and the south east. Of course it is; that is where the largest population, the most money, and the politcal per centre lies.

Unless you hold that Scots are in some way more incapable, unenterprising or idle than the inhabitants of greater London, then it seems very likely that they could do better governing themselves.

Or, like Pangloss, do you believe that everything is already for the best in this, the best of all possible worlds :-)

Dont twist my words. Just as Ireland is happy to be a continuing beneficiary of EU cash so is Scotland with the UK - there is nothing wrong with that.
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I suggest that Scotland would be much worse trying to run its own affairs than being part of the union. The UK is better united than divided and to suggest that the UK creates policy against Scottish interests is silly. In fact it is more than a suggestion, it is economic fact that Scotland is better off in the UK and no amount of word twisting will change that.

For the record, I do not believe that anyone in the UK has the right to criticise anyone else on being a 'net beneficiary' of money. The entire country is in rather a large amount of debt, so we are all recipients of the largesse of bond investors....

And perhaps Scots don't really want to be dependent on England
for the rest of time?

LEts say your analysis of Scotland is correct - and that it is dependent on English tax money then - to create a simplistic model of the UK - London and the S.East generates lots of cash and is prosperous and economic, whilst the North of England, Scotland and Wales suffer from persistent unemployment and an underlying dependency culture.

(The Economist ran an interest feature on the divide in Britain last week I think).

Is this model of unbalanced growth really a sensible, sustainable way for the UK to develop? Shouldn't Scots seek to grow their economy without needed support from England?

And if (as the SNP would argue) Westminster is too wedded to the current 'grow London at all costs' economic model, then Scotland has little option but to break away.

Scotland has grown substantially and benefited from substantial internal economic growth as a result of being part of the UK. They may always be (for example) 10% behind England economically (on average normalising oil prices and supply) but this is relative. In absolute terms they have done much better as a UK region than most small countries on their own.

Well, without a counterfactual history of what an independent Scotland would have looked like over the last 300 years it is hard to really say whether Scotland's economic growth has really been because it was part of the UK, or whether it could have happened anyway.

There are, after all, a large number of countries in Europe that have also grown substantially, without the benefit of being in a union with England....

The problem with the 'small countries not as good as big countries' argument is that there are successful small countries - if I lived in Switzerland or Luxembourg (or Singapore) then - on average - I would be wealthier than I would be in the UK. Of course, there are small countries that do badly too - but all this really tells me is that you have to look at each case on its own merits.

And my view is that there is little reason for Scotland to lag behind England at all (in terms of GDP per capita at least). That it does suggests to me that economic policies designed primarily with London in mind may actually be hindering the development of the rest of the UK.

I assume Rump UK/England would prefer Scotland to use the pound. And the hypothetically independent Scotland would do so - at least as Montnegoro and Panama use other currencies - because it doesn't have a better choice.

I also assume Rump UK/England would be wary of taking on Euro style obligations for Scotland.

Alex Salmond suggests Scottish resources will contribute to the stability of Sterling. My question is, how much of benefit would this be? Would it be enough to overcome Rump UK/England's reluctance to take on financial obligations for Scotland?

North sea oil runs out in about 50 years, once that is gone Scotland would have the economy of Wales.

The question is how much the UK will charge Scotland for power and other supplies. Salmond seems to think that the UK would give Scotland whatever it wanted, I think that the UK should make sure the price is high and get out of it every penny it can.

An independent Scotland can freeze and starve, and you won't hear a cry of sympathy from the South.

Actually, without North Sea oil, the Scottish economy really just looks like the UK economy (and its average growth rate is the same).

Scotland has large financial, services and IT sectors. Small compared to London admittedly, but in terms of the size of the Scottish population, perfectly respectable.

The question is not (and never has been) whether or not Scotland would crumble into poverty on independence it is (for most people) two questions - whether or not we would be economically better off in or out of the UK - and whether we are sufficiently different in political outlook (and culture etc) that we should separate.

'An independent Scotland can freeze and starve, and you won't hear a cry of sympathy from the South' i think thats wishfull thinking for you. you actually sound like just another scared posh boy thats bricking it because YOU KNOW the UK will lose out horrendously on scotland exiting the uk. and to make things worse for you. your country is slowly sinking, actually sinking. so good luck with that, and all the billions of pounds you'll have to spend on sea defenses. if in fact you'll still have the pound by then i personally think its more likely to be the euro or dollar with the way things are run down there....

But I do want Scottish independence. Economic mismanagement from Whitehall is far worse than it conceivably could be in an independent Scotland.

Scotland's biggest industries are:
- oil and gas (the UK's sector of the North Sea has by far the lowest recovery rates, thanks to a very badly designed tax system which kills marginal investments far too early)

- education (the Tory 'migration cap' visa policy is killing Scotland's universities right now, as barriers have been thrown up that have slashed the numbers of American & Canadian students coming here)

- business services. The 'migration cap', work visa restrictions and inefficient (long, uncertain) visa process makes it hard for international businesses to rotate staff (making Scotland unattractive). APD is horrific, which combines with Scotland's relative geographic isolation to again make Scotland far less attractive for business services or operations (which depend on network effects & frequent flights).

- oil & gas services - geology, engineering, exploration, chemical engineering, rig services, etc. Damaged by Whitehall in much the same way as the rest of business services.

- software development. Damaged by Whitehall in much the same way as the rest of business services, but with the extra burden of some of Europe's worst telecommunications regulation plus the deadweight of the BT monopoly.

- tourism. APD is one of the key reasons that so many more Americans, Canadians & Australians go to Ireland than to Scotland.

- manufacturing. Hollowed out and devastated by one of Europe's highest effective corporation tax rates (without deductions for R&D, etc), and by financial regulation & institutions focused on London & consumer lending, with no investment finance or development support to speak of.

etc

The SNP is just modelling along - they don't necessarily have great economists or grand plans for how to do everything perfectly.

But an independent Scotland muddling along is good enough - it would be far better for prosperity than the status quo.

The tendency of the Scottish to blame literally everything on England - despite having their own government - is just farcical.
After the disaster of the pair of economically incompetent Scots (Blair and Brown), foisted on England by Scotland, it should be England that is incessantly blamemongering and demanding rid of this damaging union.

The worst impediments to economic success however, are in very bad tax design (something that can't be changed by a Scottish government), lobbyist rent seeking (from the London insurance industry to numerical restrictions on the number of doctors allowed to train at Scottish universities, to pharmacy regulation, to UK-wide regulation built to protect inefficient monopolies like BT & BA) and inappropriate visa policy.

This isn't about blame. This is about recognizing the potential for greater prosperity if political institutions were better designed. And recognizing that other parties (with power in London) have vested interests running against the Scottish economic interest. Whereupon independence is the best solution.

I'm not a nationalist (and don't necessarily think of myself as "Scottish"). But I do think we could have (and in all probability would have) better government institutions after separation. That's true for a very large proportion of the people likely to vote for independence in 2014. It's not a zero sum game - we can actually both benefit from better policy design and economic success.

(1) No, interests are not well aligned:
- the very high concentration of financial sector professionals in London has disproportionate lobby influence

- the very scarce airport capacity around London and the South East, combined with the extremely strong conglomeration/network effects attracting businesses & visitors, make the cost of APD easily bearable. Indeed politically expedient (false greenwash; false progressive). Yet APD is devastating in Scotland, Wales, the North & the West.

- high population concentrations, high immigration rates and tight regulations prohibiting new construction are all driving anti-immigration sentiment in the South East, resulting in the present disastrous anti-immigration strategy which is shutting off Scottish universities and businesses from their best customers (most of whom aren't permanent immigrants anyway; not that immigration is a problem).

- very high concentration of service industries in the South East make high effective corporation tax rates attractive; no need for the R&D deductions or other provisions made in other states such that manufacturing is able to invest. With the economic structure of London & the South East (overwhelmingly services, & built around agglomeration effects & presence of global markets), it doesn't matter much whether bank regulation supports or discourages business capital investment. This has been devastating for Scotland (and also Wales & the North of England)

- very high fuel taxes make sense in the South East of England, where per capita nominal incomes are higher and per capita milage is lower, making consumers less price elastic. Fuel taxes are inappropriately high in rural Scotland however, and cause extensive social exclusion. Solution: either real time road tax, or regional fuel charging. There's no determination to solve this because London + South East is a dominant lobby

etc

In one sense I guess, interests are aligned - London would profit from an independent Scotland if that brought productivity growth & larger markets there. But politically today in a one-size-fits-all UK, interests are not aligned. Not close. It isn't so much malign intent - just malign neglect of the wide social, economic, demographic and infrastructural differences across the UK. Scotland would be much richer after a couple of decades of more appropriate tax design and regulation.

(2) No, the Conservatives do not really campaign in Scotland. Rather, they concentrate their budget, campaigning & interaction on marginal seats, only two of which are in Scotland. Labour doesn't concentrate much on Scotland either - it takes the place for granted. In any case, campaigning isn't what matters most. Rather, the structure of political donations, strength of political lobbying and infiltration of the civil service (rotating doors) are what matters most - all of which punish Scotland at present.

Unfortunately England voted for the said "economically incompetent Scots" Scotland did not vote for the wonderfully capitalistic Lady Thatcher nor did we vote for the current condem government (1 seat in Dumfries in Galloway to be exact)and just like Thatcher's reign the effect of their one sighted view of economics will be felt in years and years to come. But in essence this "damaging union" has been presided over by successive government's voted into power thanks to English votes!

sorry that youve obviously been brainwashed. salmond is not a dictator or egomaniac. hes a very good politician good speaker and very very smart. so much so that the ONLY way the no campaign can counter act is to pull a smear campaign on him, which i have to say has been relatively successful. but what they dont know is that i think the majority of ordinary people in scotland are just keeping quiet watching whats going on and are going to vote yes. because its becoming increasingly obvious the 'better together' people have not a leg to stand on

The obvious transitional solution, to me at least:
- create a "new" currency: the Scottish pound
- give it a fixed exchange rate at 1:1 parity (currency board - unlimited frictionless electronic transactions between the two at parity) with the England & Wales pound; guarantee this fixed exchange rate for a transitional period (e.g. 10 years)
- require that new debts & loans in Scotland be denominated in Scottish pounds

That would allow for a long, slow and minimally disruptive transition. It would also reserve the choice, long term, over whether it's best to join the euro, maintain a fix to the England & Wales pound or float. The factors affecting that decisions depend on financial market developments (e.g. "banking union", new regulation, interest rate developments) and trade developments (today excluding oil, £45.5 billion of Scottish goods & services exports still go to the rest of the UK while £10.1 billion go the the rest of Europe).

Whether a currency board would be stable in the short term depends on a few factors too. Scotland has a higher domestic savings rate, has a lower fiscal deficit (as share of GDP) than the rest of the UK, has a large trade surplus, and is likely to benefit economically from independence (e.g. government will stop refusing visas for high-paying international students coming to Scotland; we can slash APD for more tourism & business; we can liberalize work visas for Americans, Japanese, Canadians, Australians, New Zealanders & Koreans (for far more business investment); we can cut corporate tax rates below UK levels, etc).

'- give it a fixed exchange rate at 1:1 parity (currency board - unlimited frictionless electronic transactions between the two at parity)'

The only way to do this without use of currency reserves (that Scotland does not have) is with huge support from Britain. Why would Britain do this? Scotland has been told repeatedly that independence is complete and permanent. I can guarantee that England would not tolerate any Scottish support or bailout post independence - it would bring the government down.

'- require that new debts & loans in Scotland be denominated in Scottish pounds'
This would completely kill money market liquidity.

Namely, every pound sterling currently circulating in Scotland is backed by reserves deposited with the Bank of England.

When launching the Scottish pound, each pound would be issued in exchange for a pound sterling (deposits with the BoE). So from the outset, a Scottish currency board would have enough sterling to swap one for one.

Longer term, monetary conditions in Scotland have to remain tight enough (given underlying trade patterns) to maintain reserves. Fine. Under current trade patterns, those reserves would be growing.

Is exactly what I was thinking. Other countries have done this (Argentina, Switzerland) to maintain some kind of balance with another currency outside their control, which involves either printing more of their own currency (Switzerland, trying to swat away a flood of euros pouring in), which is easy and unlimited, or using currency reserves (Argentina fighting the falling peso) to boost your own currency's value.

Unless Scotland magically started with some reserves, and maybe the North Sea would give that to them (hell if i know), then they could only drive the 'scottish pound' in one direction should it waiver from the 1:1 parity (which it naturally will).

Rather, every pound sterling presently circulating in Scotland is actually a pound sterling - backed by deposits at the Bank of England.

When introduced, each Scottish pound would be created in exchange for a pound sterling (by households and businesses in Scotland). That would give any new Scottish monetary authority an initial reserve of pound sterling, with a pound sterling for every Scottish pound ever issued.

Scotland already has a currency reserve adequate for defending a new currency at parity to the pound sterling.

You are right to remark that that can change over time, and careful attention must be paid to maintain adequate reserves - with sufficiently tight monetary policy in Scotland. In practice, that's fine - under prevailing monetary conditions, Scottish reserve holdings of sterling would actually be growing (fast) right now.

Yep, Scotland starts with massive reserves. And Scotland isn't Argentina (extreme red, warmongering, throwing up trade restrictions, double digit pay rises in the civil service or cozying up to Iran).

Every Scottish pound would be newly issued in exchange for a pound sterling. That gives an initial reserve of pound sterling equal to all the Scottish pounds in circulation - a Scottish monetary authority could pay out a pound sterling (instantly) for every Scottish pound anybody wants to sell.

Over time, under prevailing monetary conditions, Scotland's reserve would be growing (thanks to a current account surplus). Longer term, if the parity guarantee is to be maintained, careful attention would have to be paid to ensuring adequately tight monetary policy in Scotland (so that reserves aren't being lost; so that there isn't too much money creation in Scotland for reserves to back).

All perfectly workable. Parity (especially if the currency board directly supports instant online exchanges at zero transaction cost) could easily provide for high liquidity and no market disruption.

Yet it achieves a high level of independence. Only monetary policy would be tightly affected by BoE monetary policy. There would be no need to pay heed to Whitehall dictats (e.g. barriers to favorable tax rates). And long term, there would be full freedom to float or join the euro if either alternative ever did seem more attractive.

Sterling held by BoE to back Scottish pounds is NOT a currency reserve.
'When introduced, each Scottish pound would be created in exchange for a pound sterling (by households and businesses in Scotland).'
Why would business in Scotland generate pounds Sterling? New value would be in Scottish pounds, and if the the market value of the scottish pound drops, then new currency would be needed to maintain parity. The assumption of constant economic balance or (yet again) magic oil revenue, is ridiculous.
The market (which would need to fund Scotland's deficit) would have no interest in something so flawed.
This will not work, which is why no one if floating the idea. The attitude on the financial markets to Scottish independence is to treat it as a joke.

Imagine that a Scottish pound is launched after independence. Then consumers/ households will be required to pay tax in Scottish pounds, take any new loans in Scottish pounds, etc. Likewise with businesses.

So, households and consumers will exchange some subset Y of prior money supply for Scottish pounds, in order to meet transaction demand. So the Scottish monetary authority will issue Y Scottish pounds, and exchange them for Y pounds sterling (which it keeps in reserve). Scotland then will have a money supply of Y Scottish pounds and (X-Y) pounds sterling (both circulating somewhat).

However many Scottish pounds a third party wants to sell off, there are always sterling reserves. There's no BoE involvement here.

Over time, it's possible to deviate from this. For instance, new Scottish pounds would be created when a bank issues new Scottish pound denominated loans in Scotland, or creates securities in Scotland. But so long as monetary policy is tight enough, such lending activity would not create new money faster than reserves are being accumulated.

The idea is not flawed - the only reason it hasn't been floated is because "staying with the pound sterling" is less controversial, and less likely to scare risk-averse voters from voting for independence. Still, launching a Scottish pound would be preferable and entirely feasible.

There's nothing "magical" about oil & gas. It's a big industry, and it could become much bigger with more favorable tax treatment of marginal fields. The Scottish economy, just as with Ireland or Denmark, has the potential to be rich and successful even without oil, if it is better governed. Top priorities there being visa reform, elimination of APD, cutting corporation tax rates, VAT reform (no reduced rates), pension reform, slashing military spending to 0.5% of GDP, increasing R&D investment, interconnector to Iceland, etc (any subset thereof is an improvement on the status quo).

"Scotland then will have a money supply of Y Scottish pounds and (X-Y) pounds sterling (both circulating somewhat)."
It will also have a debt of Z pounds (that being whatever the total of all public/private sterling loans outstanding at the time, this represents a quantity of pounds that will have to be found at some point, both for debt service and repayment.
I'm no expert on the niceties of setting up a new currency, but it seems to me that in practice, the efficacy of having reserves of (X-Y) pounds sterling must be impacted by the size of Z.

The 'Scottish' pounds currently circulating in Scotland are backed by deposits (on a 1:1 basis) of GBP held at the Bank of England.

But are these not private deposits owned by the bank that prints the note (i.e. the money backing a Clydesdale £10 note belongs to the Clydesdale bank (which makes it the property of National Bank of Australia I think?))?

I am not sure whether those really count as 'currency reserves' - because the Scottish Government would not be able to control them - in effect monetary policy would be carried out by the private banks (RBS, HBOS and Clydesdale) that own the deposits?